Quarterly Contribution Silliness

[Andy the Actuary]

Would appreciate any thoughts and comments and if you find any flaws in conclusions.

Facts: Frozen DB plan has 150 participants.

Facts: No change from 2009 to 2010

MV Assets: 2,000,000

FT = $1.700.000

FSCOB = $600,000

Expenses To Be Paid Out of Trust = $10,000 = MRC

Conclusions

(1) Plan has funding shortfall in 2009 of (1,700,000 - (2,000,000 - 600,000)) = 300,000 so quarterly contributions of $2,500 apply in 2010 (and in 2011).

(2) If Plan fails to make these quarterly contributions, then must meaninglessly notify PBGC for each missed contribution within 30 days.

(3) Plan sponsor cannot issue standing election to apply FSCOB to get around quarterly contributions because ordering provisions of final regs would apply FSCOB after quarterly due dates.

(4) Possible remedies

(a) Plan sponsor can made $10,000 contribution before first quarterly is due

(b) Plan sponsor can elect to burn $310,000 of FSCOB so that not only there is no shortfall on 1/1/2010 (i.e., no quarterly contributions due in 2011) but also there is no MRC in 2010.

© Plan sponsor could elect before first quarterly contribution is due to apply $10,000 of FSCOB to MRC.

(d) Plan sponsor could elect before first quarterly contribution is due 4 separate elections to apply FSCOB to reduce quarterly contribution.